Easy 401k Rollover in 4 Simple Steps

By : Jeremy Sorci | April 3, 2021

Want to roll over your 401k, but you’re just not sure where to start?

Jeremy Sorci is a CFP, Certified Financial Planner and a 401(k) Financial Advisor with Premier Financial Group in Eureka Humboldt County

You’re not alone; our retirement plan advisors field questions about 401k rollover options on a regular basis. And while the process may seem overwhelming, it can actually be quite simple: If you follow these four easy steps. 

1. 401k Advisors Help You Decipher Your Current Plan

Before you start the 401k rollover process, meet with your 401kadvisor to discuss your options. Bring your current plan’s most recent statement and documentation with you, so you’ll know:

  • Your current balance
  • How much you’ve contributed
  • How much your employer matched
  • Your account’s growth

You should also contact your plan administrator and have them walk you through the 401(k) rollover process. Your advisor will work with you to identify which funds your account is invested in the portfolio and its associated growth patterns.

2. Decide Which Type of Account Works for Your 401k Rollover

401k Rollover

What type of account should you roll your plan into? If your new employer offers an employer-sponsored 401k, this may be the easiest option. But if they don’t, or you’re going to be self-employed, you may want to consider alternate options.

Individual Retirement Accounts or IRAs come in a range of options that may allow for more variety in your asset allocation. Your wealth management advisor can help you select the type of account that makes most sense for your individual needs.

3. Investment Allocation: An Asset Management Solution

Now that you’ve chosen your next account, it’s time to determine how to allocate your assets. Start by comparing the fees you paid with your last account to the fees associated with your new account. Next, look at the mix of asset classes within the funds; do you want to remain in a similar mix, or shift into an account with a different strategy?

You’ll also want to ensure that you’re contributing as much as you can. Though many investors simply contribute enough to reach the max that their employer matches, it may be beneficial to contribute more. 

4. Always Choose Direct 401k Rollover Options

Now it’s time to initiate a direct rollover. Why is it so important to directly rollover this retirement savings plan from one account to another, rather than having a check made out to you then depositing the money in your new account? A direct 401(k)rollover skips the middle man (who, in this case, is you) and transfers your assets from your existing account to your new account.

If you don’t transfer the account directly to the new custodian, the IRS requires your employer to impose a 20 percent withholding penalty on the funds, even if you intend to immediately deposit the money in your new account. Simply avoid this problem by paying very close attention when you’re filling out the rollover paperwork; remember, your financial advisor should be willing to help you with this process.

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